No crushing next season if Rs 100 bn debt isn't settled: UP sugar mills

Ahead of the sugarcane area reservation meetings next week, the private sugar millers in Uttar Pradesh reiterated on Friday their unwillingness to operate units for the coming 2018-19 crushing season until the core issue of outstanding burden of more than Rs 100 billion is decisively settled by the state government.

The reservation meetings, beginning from September 11 to 22, are conducted to reserve sugarcane area to respective mills depending upon their capacity, demand, performance in previous crushing season, payments ratio etc.

However, in a letter addressed to the state cane commissioner today, UP Sugar Mills Association (UPSMA) has firmly referred to the purported precarious financial position of private millers arising out of the massive arrears pertaining to the previous 2017-18 crushing season even as the next season was fast approaching.

UPSMA has reiterated its demand for ‘cane pricing reform’ and the urgent need for financial assistance to the mills for settling overdue payments to farmers. Besides, the Association has also referred to the previous letters to the government apart from the meetings with chief minister Yogi Adityanath in this regard.

In its July 2018 letter, UPSMA had informed the state government about its inability to participate in the forthcoming cane surveys and reservation processes in run up to the 2018-19 crushing season. The Association has long been demanding the state to implement the system of cane pricing based on a revenue sharing formula to insulate mills from the cyclical nature of sugar prices and the complex dynamics of demand and supply in the domestic and international sugar sector.

Recently, the Adityanath government had allocated Rs 40 billion in UP supplementary budget to offer as soft loans to private sector mills for settling their arrears. However, the mills have claimed the proposal was unviable in the present circumstances.

“When, the mills already have massive arrears to settle, their balance sheets does not allow them to take fresh loans, since repayment would again arise, while he coming season is also not looking too promising owing to projections of glut and subdued sugar prices” UPSMA secretary general Deepak Guptara told Business Standard.

Meanwhile, cane commissioner Sanjay Bhoosreddy claimed the private mills had participated in the recent cane surveys even as he expressed confidence that the millers would come on board for the reservation process too. “The reservation meetings provide an important platform to mills for airing their grievances and putting forth their suggestions.”

Earlier, the Adityanath government had asked mills to start crushing operations early from October 15 onwards although the private units, numbering 94, had stressed their inability to participate in the coming season due to arrears and paucity of working capital.

Owing to higher pan-India estimated cane acreage of 5.44 million hectares (MH) in 2018-19, 8% higher compared to previous season, the sugar production has been pegged at almost 35.5 million tonnes (MT) by Indian Sugar Mills Association (ISMA).

UP cane acreage is estimated to touch 2.6 MH from about 2.2 last year. Adityanath had also directed officials to ensure mills started operations early for allowing farmers to empty fields for sowing of rabi (winter) crops, especially wheat. With 2019 Lok Sabha poll approaching, the state government does not want to antagonise 4 million farmer households engaged in cane farming.

Last year, UP sugar production stood at the record level of 12 MT, while the mills had purchased total cane worth over Rs 350 billion from farmers, although they have only paid about Rs 250 billion so far.